Fixed term lease break

Our Experts Answer:

A fixed term tenancy can only be ended early by mutual agreement or by order of the Tenancy Tribunal. Some exceptions apply, such as where the property is destroyed or where there is a mortgagee sale situation. A landlord may agree that the tenants can be released at an earlier date or instead may attach the condition that the tenancy agreement will continue until new tenants are found to take over.

The landlord and tenant need to agree on whether new tenants taking over will be by assignment of the remaining portion of the fixed term to a new tenant, or on a whole new agreement with different terms (for example a whole new fixed term). A landlord must not unreasonably withhold their consent to a tenant’s request, unless the tenancy agreement states the tenant cannot do this. The landlord may attach reasonable conditions as part of their consent.

It is important that the tenant and landlord understand each other’s expectations and get this understanding in writing. Under the rules of assignment the landlord can require the tenant to pay all reasonable costs associated with finding replacement tenants. This may include (but is not limited to) advertising costs and credit checks.

During the assignment process, landlords and tenants still need to meet their ongoing responsibilities under the RTA. Either party may issue a 14-day Notice to Remedy (or breach letter) for any breaches of the tenancy agreement, which may include maintenance work or rent owed. If the tenants believe that the landlord’s actions are unreasonably preventing new tenants taking over, or if the landlord believes the tenants are not complying with the tenancy agreement or any reasonable conditions attached to ending the fixed term early, then either party may apply to the Tenancy Tribunal to have the dispute resolved.

You will need to inform the current or prospective tenants in writing if you choose to sell the premises.

For more on the rights and responsibilities of landlords and tenants, go to www.tenancy.govt.nz or subscribe to our e-newsletter here.